Huobi is to hold a community vote to decide the future of the Huobi Token. The Huobi token (HT) is an ERC 20 standard utility token that grants holders access to the services provided by the Huobi Group. This typically includes digital asset exchange and management services, and even investment in upcoming blockchain projects.
Some of the privileges granted by holding HTs include discounts on trading fees upto 50%, and voting rights on the community decisions such as what tokens or coins to list on the Huobi Next trading platform. HT is also tradable against Tether (USDT) Bitcoin (BTC) and Etherium (ETH)
Why buybacks are a good economic policy
A buyback is a process in which a company spends a portion of its profits to buy its own token. This can serve to create scarcity thereby raising the token prices, or in the case of excess supply in the market where the token is oversold, a buy back can stabilize market prices. In the cryptocurrency space, there is an increasing number of projects that implement buyback policies.
- As per the laws of demand and supply, the market price of any given item is directly correlated with how much supply there is in the market. To illustrate, scarcity drives up prices, considering other factors are held constant.
In the initial plan, Huobi has a buyback plan in which every quarter a percentage (20%) of the company's profits is used to buy back the native token HT, and use it to fund the Huobi User Protection Fund, which serves to protect users interests and acts as an insurance against risks that might t arise from using the Huobi platform. Currently the User protection fund is well backed to handle any emergency situations; as such Huobi has shifted to airdropping the bought back tokens to Huobi holders. The caveat is that you have to hold your HTs on the Huobi trading platform in order to receive airdrops.
The primary problem with this model is that when there isn't a substantial buy pressure for the token, the increased supply in the market might result in negative price action when the users choose to sell their tokens instead of holding them.
However, there has been a section of the community who have suggested an alternative; instead of airdropping the HTs, they should be burnt in order to reduce the market supply. Coin burning refers to the action in which tokens are sent to a verifiable public address with no private keys. These tokens are rendered defunct thereafter, and are removed from the circulating supply permanently thereby creating scarcity.
A fundamental thing to note is that, coin burning does not always lead to an increase in token prices. Other market factors such as communal market sentiments are still at play. This is best exemplified by the latest Bitcoin cash hash wars which created a lot of FUD (Fear Doubt and Uncertainty) leading to an all-round crypto market crash.
THE HUOBI TOKEN FUTURE VOTE
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Announced on the 26th of November, the community vote is to decide whether the tokens acquired through buy backs should be airdropped to coin holders or burnt. The snapshot for voting was taken on 2nd December 12 am Singapore time, which simply means the amount of HTs held by a user at that specific time is what will be considered as viable votes. The voting covers a four day period from 3rd December 1500 Hrs to 6th December 1500 Hrs Singapore time, which should be ample time to allow all community members to voice their opinion on the future of the token via ballot.
Livio Weng, the Huobi Group Vice president stressed on the importance of community involvement in the direction of the Huobi ecosystem. "One of Huobi's core values is giving our users maximum choice so putting this up to vote was a natural choice for us," He also added, "We feel our HT community should have a say in the overall future of this project."
The event program
The voting process is designed on egalitarian and democratic principles, anyone can participate. The voting rules are as follows:
Every token holder is entitled to participating in the vote
Every HT token held entitles one to a single vote. For example a holder of 20HT, can cast 20 votes in favor of his preferred solution, be it coin burning or airdropping.
The vote is decided by the option that garners more than 50 percent of the total votes cast. The results will be released after
Most importantly, the normal functioning of the Huobi ecosystem won't be affected by the process. Trading activities will continue as usual.
To Wrap Up
Bearing in mind the the yearlong bear market, it is conceivable that community level responsibility is desired to maintain prices and safeguard the vision of any given project. Considering all factors are held constant, a buy back is a great idea, the scarcity created thereof lifts up token prices which in effect transfers the ecosystem benefits to holders.
As an economic policy, airdropping tokens that have been bought back goes against creating scarcity. In the event where there is overwhelmingly positive general market sentiment, the additional token supply may not affect market prices. However in an average or a bear market an increase in circulating supply may negatively impact prices.
Comparatively, a buyback followed by coin burning, creates permanent scarcity, as the coins are permanently removed from circulation. Secondly, it is a cost effective way of redistributing ecosystem benefits to users since the company does not have to send tokens over the blockchain which attracts transaction fees.
In the current market, I would agree that buy back plus coin burning is a better strategy than airdropping the tokens back to holders. As always, every token holder is privy to his or her own decision.
If you don't have a Huobi account, you can register here, and join an ecosystem in which your voice counts towards the future of the ecosystem.
Disclaimer- As always, this is not financial advice. This article is based on personal opinion, and I advise everyone to do their own research, and consult a financial advisor if needed, before investing.